WASHINGTON – One of Osama bin Laden’s chief moneymen has been implicated in the kidnapping of Wall Street Journal reporter Daniel Pearl, validating India’s claims that Pakistan continues to be a base of terrorism.

Both the State Department and Pakistani police have named Ahmed Omar Sayeed Sheikh, aka Sheikh Omar Saeed, as a major suspect in the kidnapping of Pearl, who was working on a story about alleged shoe-bomber Richard Reid’s links to Pakistan and possibly al-Qaida subsidiaries there.

Pearl was snatched in Karachi, Pakistan. Police have arrested three possible abductors or accomplices there, but have not detained Sheikh.

As WorldNetDaily reported Jan. 30, Sheikh is a member of Jaish-e-Mohammed, a Pakistan-based Islamic militant group believed to be one of al-Qaida’s arms in Pakistan. J-e-M is headed by Mohammad Masood Azhar, aka Maulana Massod, who reportedly has close links to both bin Laden and Pakistan’s military intelligence agency.

Sheikh, who was last reported seen in Karachi, allegedly helped finance the Sept. 11 attacks on America by wiring $100,000 to ringleader Mohammed Atta before the hijackings.

He and Azhar were released from an Indian prison in 1999 after five of their confederates, using knives, hijacked an Indian Airlines flight to Kandahar, Afghanistan, and held passengers hostage. As part of the deal, the two were set free in Kandahar.

Indian authorities have accused J-e-M’s Azhar of masterminding the Dec. 13 attack on the Indian Parliament. One of the five terrorists killed in the suicide attack is thought to be the leader of the Indian Airlines hijacking.

Indian authorities have demanded Pakistan’s president Gen. Pervez Musharraf crack down on J-e-M. In response, Musharraf has banned the terrorist group.

But India says he hasn’t done enough, having rounded up only one of the suspects on its list of 20 top Pakistani terrorists.

Meantime, the Bush administration continues to praise Musharraf for his help in the war on terror.

But U.S. officials tell WorldNetDaily that the FBI is quietly working with Pakistani authorities to try to gain access to Sheikh and Azhar in Pakistan to interrogate them about ties to al-Qaida and the Sept. 11 attacks.

One official said the FBI has “beefed up” its office in Islamabad to help in the investigation of J-e-M, which was recently added to State’s list of terrorist groups.

An FBI spokesman declined comment, citing “diplomatic issues.”

At the start of America’s war on terrorism, Secretary of State Colin Powell pushed for the idea of forging an alliance with Pakistan, even though it’s a hotbed of Islamic fundamentalism and, at the time, had formal diplomatic ties with the ruling Taliban militia in Afghanistan.

In exchange for Pakistan’s cooperation in the war, Powell promised Musharraf more foreign aid. He also pledged to forgive some of Pakistan’s debt to the U.S.

Musharraf is scheduled to meet here next week with President Bush to talk about the aid package, among other things.

A Senate foreign-relations adviser says that the administration is caught in a thorny spot over Pakistan. On one hand, it’s an ally in America’s war on terrorism, he says; yet on the other, it’s still an active base for anti-American terrorists.

What’s more, Pakistan may have provided bin Laden and his top henchmen safe passage into that country, possibly giving him refuge in Karachi’s mosque district, although Musharraf sternly denies any suggestion bin Laden escaped to Pakistan. Karachi is on Pakistan’s coast, and would provide bin Laden quick escape by sea.

Can the U.S. punish its ally if it doesn’t crack down harder? Not likely, government sources say, at least not now.

“Truth is, we’ve still got troops on the ground in the semi-secret base we’ve got over in the western part of Pakistan, in the tribal areas,” the Senate aide said. “And we’ve evacuated injured troops out of Afghanistan to Pakistani hospitals.”

Asked about Powell’s wisdom in trusting Pakistan, the GOP aide replied, “We were allied with Joe Stalin for crying out loud,” during World War II.

“In war, you do that,” he said, adding that Afghanistan is landlocked and U.S. carriers in the Arabian Sea needed the consent of Pakistan to use its airspace to fly sorties into Afghanistan.